2023-07-04 04:55:00 ET
Uranium prices are doing well in 2023 as other commodities recoil. The closely watched Global X Uranium ETF (URA) has jumped by over 18% from its lowest level this year. It has underperformed the spot Uranium price, which has jumped by over 18% year-to-date.
The bullish case for uranium
Uranium is an important commodity that is widely used to power several countries like the United States, France, Russia, India, and the UK among others. It is the most important commodity in nuclear power energy.
The biggest uranium producing countries are Kazakhstan, Namibia, Canada, Australia, Uzbekistan, and Russia among others. Unlike most energy commodities , demand for uranium is usually stable because nuclear power plants provide baseload plants.
Analysts believe that uranium prices will do well this year. Those at Bank of America wrote that uranium price could jump to $75 a pound in the next few years. The average uranium price forecast is that it could hit $60 from the current $50.
The bullish case for uranium prices is mostly because of the ongoing transition from fossil fuels to green energy. While most countries are investing in wind and solar, analysts believe that nuclear is much more reliable.
As a result, several countries, including the US, will announce plans to boost nuclear power investments. A recent report showed that nearly two-thirds of all $2.8 trillion investments in energy will go to clean sources, including nuclear. Global investments in nuclear will rise to $63 billion this year from $10 billion in 2022, as we wrote in this article .
At the same time, uranium supply is not expected to grow as fast. For one, it takes many years for a uranium mine to go online. In contrast, it takes a few months to drill a shale oil well in the US. As such, analysts believe that uranium will move into a supply deficit in the coming years.
Global X Nuclear ETF is one of the best ways to invest in nuclear. It has over $1.57 billion in net assets and an expensive expense ratio of 0.69%. In addition to having uranium in its custody, the fund also invests in several mining companies.
URA ETF stock price forecast
The daily chart shows that the Global X Nuclear ETF stock has moved sideways in the past few months. As a result, the shares are hovering at the 25-day and 50-day moving averages while the Average True Range (ATR) indicator has continued drifting downwards.
The current price is also along the highest point in November last year. Therefore, I believe that the consolidation phase will continue in the coming months.
A bullish breakout will be confirmed if the price moves above the key resistance level at $23.32, the highest level in June. If this happens, the next target will be at $23.97 (September 22 high). A break above this level will lead to more upside in the long term.
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